Joint Ventures will continue to shape industry structure in the world largest car auto market

China’s auto market and industry structure is renowned for its complexity and especially the existence of a large number of joint ventures between global automakers and China’s State Owned Enterprises (SOEs). Under the current regulations, foreign automakers’ maximum stake is restricted to 50% and foreign assemblers can have a maximum of two joint ventures per vehicle category.

The original objective of this policy was to allow controlled entry of foreign automakers into China, with the aim of enabling and encouraging transfer of technology and management know-how to Chinese partners, which are all SOEs.

It is now over 12 years since China entered the WTO and it is surprising that China still manages to retain such restrictions on foreign ownership of vehicle assembly operations. There has been little international pressure on this issue, largely because most of the major global automakers have already entered into very long-term joint venture agreements with their partners in China and now appear to be comfortable with the status quo.

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